Government involvement has actually led to all these problems. The real answer is to get government out of the picture.

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The big news of the week has been the new finance minister, Yair Lapid, shooting
off his mouth, or should I say his keyboard, in his highly controversial
comments about “Mrs. Ricki Cohen” from Hadera. His political enemies have been
quick to jump all over him for his definition of the middle class.

As a
refresher, Lapid posted on Facebook how the Finance Ministry needs to help Mrs.
Cohen; i.e., families earning a little over NIS 20,000 (about $5,800) a month,
who own an apartment and travel abroad twice a year, but have no chance of
purchasing an apartment in the future for one of their three children. His
enemies have accused Lapid of totally being cut off from the general Israeli
public, as families living on NIS 20,000 a month are considered to be upper
class. They contend that those in real need of help are couples who bring in NIS
10,000 to NIS 15,000 a month and that the government has forgotten about
them.

My criticism is based in his magia li (I deserve it) attitude that
few people seem to be questioning. Why on earth do parents have to buy an
apartment for one of their three children? What kind of right is that? And if
parents believe that is a value and want to help their kids, maybe they should
stop traveling abroad with the whole family twice a year and save that money
instead. Let’s just say that those those jaunts abroad cost the Cohens $15,000 a
year. Well if they would save that money they would have enough for a down
payment on one of their kids apartments in five to six years.

Not a huge
sacrifice.

The real problem is that everyone – including Lapid, Shelly
Yacimovich and Mrs. Cohen herself – believes that the solution to their problems
lies in the hand of government.

Government involvement has actually led
to all these problems. The real answer is to get government out of the picture.
Free up land, encourage entrepreneurship by lowering taxes and cutting the
endless amount of red tape, as well allowing competition are the way to help the
middle and lower class.

As I have mentioned here numerous times, the way
to solve the budget crisis is not by raising taxes; it’s by cutting spending,
limiting government and having actual economic growth. By growing the Israeli
economy more people will have good-paying jobs, they will pay into the system
and government revenues will increase. It’s not some kind of magic; it’s just
plain common sense.

Jerusalem real estate

You may be wondering what any
of this has to do with Jerusalem real estate. Well, an article on Ynet this week
mentioned a law that was passed by the Jerusalem Municipality to tackle both the
affordability of apartments for young couples and the “problem” of apartments
owned by foreigners that sit empty for most of the year. The law requires owners
of vacant apartments to pay twice the amount of arnona (municipal tax) if they
don’t rent out their apartment during the period of the year that they are not
living in their apartment. The law’s authors believe this will force owners to
sell, thus freeing up apartments for young buyers. Very noble.

And very
naive. Aside from the moral issues of telling someone what they should or
shouldn’t do with their very own property, how on earth is this going to solve
the problem? No. 1: If you owned an apartment that you use two to three weeks a
year and is worth a minimum of $750,000 and probably worth over a $1,000,000,
would you rent it out to some students so that you can make NIS 6,000 a month
and run the risk they will trash it? Would you suddenly consider selling if you
have to pay an extra NIS 10,000 a year of arnona tax? No. 2: What young couple
is going to be able to afford one of these apartments that is worth a million
dollars? And if they can afford it, what are they doing complaining that there
is a shortage of affordable housing? This law, like most laws, is completely
useless and does nothing to try and help the plight of those who need help. It’s
rather ironic that the supporters of this law were opposed to the Safdie plan
that would have created tens of thousands of new housing units in western
Jerusalem but opposed it for environmental reasons.

They are the ones who
caused the housing crisis in Jerusalem, and this is their big solution? The real
solution is for citizens to stop looking to politicians for help and for
politicians to get out of the way, unshackle the economy and let it flourish.
After all, I am sure Mrs. Cohen knows how to spend her money much better than
Yair Lapid. Just give her the chance.aaron@lighthousecapital.co.il

Aaron
Katsman is a licensed financial adviser in Israel and the United States who
helps people with US investment accounts.

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